Author Andreas Clenow has done an outstanding job writing a landmark book for readers interested in systematic trend following of futures. He gives basic systematic trend following strategies with entry and exit parameters, position sizing, and shows the watch list for futures markets needed for proper diversification. He explains systems based on breakouts and moving average crossovers. It’s amazing how his backtested returns correlate closely to the returns of some of the top managed futures trend following firms in the industry.
The trend following system examples are a great place for a trader to start to develop their own system that fits their risk tolerance levels and return goals. The book does a great job taking the reader through a year by year breakdown of the system’s performance, and explains the emotions that would be experienced trading the system in real-time. The book does an outstanding job explaining the needed discipline and proper position sizing that must go side by side with the entry and exit signals to make the system work.
The key lessons are that the leverage of futures provide the opportunity for out-sized returns for relatively small position sizes. The money not needed for futures positions can be used to gain interest in bonds to increase earnings. From a money managers perspective, you have to communicate to your investors and explain the system to help avoid withdrawals during drawdowns. Trend following works primarily through the diversification available through the futures markets, and profitability comes from large trends that pay for all the small losses.
This book does the best job I have ever seen explaining the principles of trend following with managed futures. This is a great book for anyone interested in creating their own trend following system for their personal account, or even aspiring to be a money manager in the industry. Andreas Clenow does a wonderful job explaining the process step-by-step, as well as the pitfalls and rewards available in the industry.